Can I eliminate a second mortgage in chapter 7?

As a chapter 13 Ft. Lauderdale bankruptcy attorney, we have long been able to eliminate as a lien on homestead property a second mortgage or equity line if the property is worth less than the balance of the first mortgage.  This lien stripping has been common practice in chapter 13.   A tougher issue is can you eliminate the second mortgage lien in a chapter 7 and retain the homestead? The short answer is no.  Case law across the country generally has concluded that the lien cannot be eliminated.  Just this week in an anticipated ruling involving several cases in which chapter 7 attorneys tried to strip a second mortgage, a court in the Middle District of Florida also concluded that these liens cannot be stripped in a chapter 7.  In Re Hofffman, case no 6:09-bk-18839 KSJ, decided June 28, 2010.

I would like to distinguish eliminating the debt and the lien.  In a chapter 7, the obligation on the note on both the first mortgage and the second mortgage is discharged.  The debt is eliminated, so the homeowner can move at any time  without any liability.  However, both mortgages must be paid to avoid foreclosure.



Leave a Reply

Your email address will not be published. Required fields are marked *